Question

Waterway Industries Recorded operating data for its Cheap division for the year. Waterway requires its return to be 10%. Sales $1600000 Controllable margin 88000 Total average assets 4400000 Fixed costs 100000 What is the ROI for the year

Answer 1

See below

Step-by-step explanation:

Given the above information, first we need to get the value of contribution margin , which is computed as;

Controllable margin = Contribution margin - Total direct fixed cost

$88,000 = Contribution margin - $100,000

Contribution margin = $88,000 + $100,000

Contribution margin = $188,000

Also,

Net income = Contribution margin - Total fixed expense

Net income = $188,000 - $100,000

Net income = $88,000

Return on investment = Net income ÷ Average operating assets

Return on investment = $88,000 ÷ $4,400,000

Return on investment = 2%

Therefore, the ROI for the year is 2%